Asian Stocks Extend Falls as China, Europe Concerns Temper U.S. Sales Data

Asian stocks dropped, with the regional benchmark falling to its lowest level in eight weeks, amid concerns Europe’s debt crisis may spread and China may raise interest rates to curb inflation. Exporters rose after a report showed U.S. consumers increased holiday spending.

China Construction Bank Corp., the nation’s second-biggest lender, decreased 1 percent after a Chinese Academy of Social Sciences economist said the government needs to raise borrowing costs by another 2 percentage points. TDK Corp., a Japanese electronics maker that gets more than 30 percent of its sales from China, dropped 3.6 percent. Li & Fung Ltd., the biggest supplier to retailers such as Wal-Mart Stores Inc., climbed 1.4 percent in Hong Kong.

The MSCI Asia Pacific Index fell 1 percent to 128.34, its lowest level since Oct. 5, as of 6:17 p.m. in Tokyo, with more than two stocks falling for each that rose. The measure earlier climbed as much as 0.4 percent.

Today’s decline means the gauge has dropped 0.8 percent this month, the first retreat in three months. China ordered banks to set aside larger reserves twice this month after raising interest rates in October to fight inflation.

“Interest rates in China are still too low,” said Pauline Dan, Hong Kong-based chief investment officer at Samsung Investment Trust, which oversees about $72.1 billion in assets. “I’d rather see China normalize interest rates sooner rather than later. Inflation is not good for the economy over the longer term.”

China’s Shanghai Composite Index fell 1.6 percent. Hong Kong’s Hang Seng Index slipped 0.7 percent. China’s recent increases in banks’ reserve requirement ratio won’t be enough to reverse excessive liquidity in the system, Zhong Jiyin, an economist with the Chinese Academy of Social Sciences, wrote in a commentary in the China Daily today.

Chinese Lenders Drop

China Construction Bank slipped 1 percent to HK$7.01 in Hong Kong. Agricultural Bank of China Ltd., the nation’s fourth- largest lender by assets, declined 1 percent to HK$4.05.

Japan’s Nikkei 225 Stock Average lost 1.9 percent, the most since Oct. 12, as a report showed the nation’s unemployment rate climbed. The measure rose 10 percent this month to yesterday, the fastest pace among gauges for the world’s 40 largest equity markets.

India’s Sensitive Index advanced 0.6 percent after a report showed the nation’s economic growth in the third quarter beat estimates. DLF Ltd., the country’s biggest developer, jumped 6.4 percent.

Australia’s S&P/ASX 200 Index fell 0.7 percent. South Korea’s Kospi Index gained 0.5 percent, rebounding from two straight days of declines in the wake of an artillery attack by North Korea last week.

‘Jitters May Linger’

“Some investors feel relieved that there’re no further provocations by North Korea,” said Seo Jung Ho, a fund manager at UBS Hana Asset Management Co. in Seoul. “Jitters may linger for a while, but there seems to be an increasing perception that this geopolitical issue won’t spread further.”

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The index slid 0.1 percent yesterday in New York as Ireland’s bailout failed to ease investor concern that Europe’s debt crisis may spread.

Ireland, swamped by the bursting of a decade-long real- estate bubble and unemployment approaching 14 percent, became the second country to tap European assistance this year, following Greece. Officials meeting last weekend in Brussels agreed to an 85 billion-euro ($111 billion) bailout package.

The MSCI Asia Pacific Index dropped 2.1 percent last week on concern the European Union will fail to contain the spread of Europe’s sovereign debt crisis and as North Korea bombarded South Korea.

‘Difficult to Measure’

“I don’t think the geopolitical risks have been priced in,” Samsung Investment’s Dan said. “This risk is more difficult to measure than Europe’s credit crisis. In the case of a sovereign debt crisis, you will have some idea on the time frame on how this is going to roll out.”

Gauges of consumer discretionary companies as well as energy and raw material suppliers led declines among the 10 industry groups in the MSCI Asia Pacific Index on concern economic growth in China will slow as the government intensifies efforts to curb inflation.

TDK, the world’s largest maker of magnetic heads for disk drives, dropped 3.6 percent to 5,390 yen. BHP Billiton Ltd., the world’s biggest mining company dropped 1.2 percent to A$42.74. Jiangxi Copper Co., China’s largest producer of the metal, decreased 1.8 percent to HK$22.50 in Hong Kong. Cnooc Ltd., an offshore oil producer, slid 1.9 percent to HK$16.84.

Hitachi Construction Machinery Co., a Japanese maker of excavators that gets more than one-fourth of its sales in China, sank 3.1 percent to 1,908 yen. Komatsu Ltd., a maker of earth movers that gets about 20 percent of its sales in China, retreated 2.4 percent to 2,318 yen.

Japan’s Jobless

Separately, Japan’s unemployment rate in October rose to 5.1 percent from the previous month’s 5 percent, the statistics bureau said today in Tokyo. The median forecast of 25 economists surveyed by Bloomberg News was 5 percent.

Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, slumped 5.2 percent to 23,500 won in Seoul. KTB Securities Co. cut its share-price estimate to 23,000 won, saying the company will probably post operating losses through the end of next year’s third quarter.

Among advancing stocks, exporters climbed after a report showed U.S. consumers spent more over the Thanksgiving weekend than last year, signaling fuel demand may increase in the biggest crude-consuming nation.

Exporters Advance

The average shopper in the U.S. spent 6.4 percent more over Thanksgiving weekend than last year as more people picked up jewelry and toys, heartened by the economic rebound.

Li & Fung, which counts the U.S. as its biggest market, climbed 1.4 percent to HK$48.40 in Hong Kong. Techtronic Industries Co., maker of Ryobi power tools and Hoover vacuum cleaners, gained 2.6 percent to HK$8.44 in Hong Kong. Nintendo Co., maker of Wii video game consoles, rose 3.4 percent to 22,730 yen.

Among Indian stocks, DLF surged 6.4 percent to 304.8 rupees. Bharti Airtel Ltd., India’s largest mobile-phone carrier, surged 5.8 percent to 358.3 rupees. Reliance Infrastructure Ltd., controlled by billionaire Anil Ambani, rose 2.2 percent to 841.55 rupees.

The nation’s gross domestic product rose 8.9 percent in the third-quarter from a year earlier, matching the revised pace of growth in the previous quarter, the Central Statistical Organisation said in a statement in New Delhi today. That was above the 8.2 percent median estimate of 30 economists in a Bloomberg News survey.

The MSCI Asia Pacific Index increased 7.6 percent this year through yesterday, compared with gains of 6.5 percent for the S&P 500 and 3.3 percent for the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 14.3 times estimated earnings on average, compared with 14 times for the S&P 500 and 11.6 times for the Stoxx 600.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net. To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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